Acquired
02:21:21 · Ben Gilbert, David Rosenthal
[02:21:21] S0: At least reportedly. Again, this is like a funny thing about doing this versus covering public companies is, like, we're relying on some reporting done by a few news outlets over the years, but I think we have to take that at face value. [02:21:31] S1: Yes. But assuredly, billions of dollars have gone through this waterfall. So, yeah, we we sort of joked about Sony slash Columbia earning their keep in this first syndication cycle, which is just for local broadcast affiliates. They can't take it to cable yet. Sony sells the show to a record 224 local TV stations across America. [02:21:58] S0: Out of the thousand TV stations total. So, basically, one station in every market of the country taking the exclusive local rights. And that generated an aggregate sum of $500,000,000 in revenue.
02:21:58 · Ben Gilbert, David Rosenthal
[02:21:58] S0: Out of the thousand TV stations total. So, basically, one station in every market of the country taking the exclusive local rights. And that generated an aggregate sum of $500,000,000 in revenue. [02:22:12] S1: Actually, over $500,000,000 in revenue in a single event here in 1995, and that was just for the first five year syndication window and only on local TV affiliates, not even on cable yet. Yeah. And it turned out that those local affiliate stations that were paying all that money for Seinfeld actually were getting a pretty good deal. Because all of a sudden, reports start popping up as Seinfeld enters into syndication where stations that would run Seinfeld reruns would end up winning the time slot in their local market. They would beat live programming on other stations at the same time. So, like, let's say you're, you know, local affiliate TV station in Buffalo, New York. You decide that you're gonna run Seinfeld reruns during a particular time slot when the other stations in town are running local news. Seinfeld beats the local news. [02:23:15] S0: It's the audience of people who never got to watch it on network, cause it only ever aired twice. Like, you missed a big episode. Let's say you missed the contest. You were working the first night, and then you weren't around because you were doing summer travel or whatever. The only chance to catch it is in syndication, and that's a thing that everyone talked about. That could be a marketing event if you were a local TV station Right. Trying to drive a bunch of attention. We're gonna air that episode.
02:23:15 · Ben Gilbert, David Rosenthal
[02:23:15] S0: It's the audience of people who never got to watch it on network, cause it only ever aired twice. Like, you missed a big episode. Let's say you missed the contest. You were working the first night, and then you weren't around because you were doing summer travel or whatever. The only chance to catch it is in syndication, and that's a thing that everyone talked about. That could be a marketing event if you were a local TV station Right. Trying to drive a bunch of attention. We're gonna air that episode. [02:23:41] S1: Right. You could market that you are gonna be running the contest on Yes. Tuesday night at eleven or something like that. I mean, that sounds way more compelling than local news to me. [02:23:51] S0: Or whatever other local programming. I mean, I think, Wheel of Fortune... There were a lot of, like, game shows Yep. That would be... I think the phrase is first run syndication that would skip the network altogether and be produced directly to sell to the local affiliates. Actually, Oprah was this. [02:24:06] S1: Yes. We talked about this on our Oprah episode. Yep. And just to make it even more fitting, that same year in 1995 when Seinfeld hits syndication is when Fin Sin gets repealed. Yeah. So the door is now slammed that no other shows are gonna have these dynamics because the networks now are gonna own their own shows. And this is gonna play out over broadcast television a little bit, and it's gonna play out big time in the streaming era.
02:24:06 · David Rosenthal, Ben Gilbert
[02:24:06] S1: Yes. We talked about this on our Oprah episode. Yep. And just to make it even more fitting, that same year in 1995 when Seinfeld hits syndication is when Fin Sin gets repealed. Yeah. So the door is now slammed that no other shows are gonna have these dynamics because the networks now are gonna own their own shows. And this is gonna play out over broadcast television a little bit, and it's gonna play out big time in the streaming era. [02:24:38] S0: Which if you're Castle Rock, it's a good time to cash in your chips because you have this super valuable library, which you own. You actually own it, and it's guaranteed to make all this money in the future. And the regulation that was in place that let you make future shows, you have no idea if you're gonna be able to sell the next hit show to NBC. They probably should make it in house themselves. So this is a very good time to, sell the company. [02:25:04] S1: Yep. So Castle Rock sells itself to Ted Turner and TBS here as this is all going down. It's a [02:25:13] S0: little earlier, December ninety three by the same [02:25:14] S1: But it was when when it was announced that the Finsen rules were gonna get repealed even though it went into effect in 1995. Castle Rock sells to Turner.
02:25:14 · David Rosenthal, Ben Gilbert
[02:25:14] S1: But it was when when it was announced that the Finsen rules were gonna get repealed even though it went into effect in 1995. Castle Rock sells to Turner. [02:25:21] S0: It was a $100,000,000 in cash for Castle Rock's owners, plus another 300,000,000 or so in paying off the outstanding debt. So the total out of pocket that Turner paid for Castle Rock, which owns that huge share of Seinfeld's profits and a bunch of other great stuff, was about 400,000,000. What an unbelievable steal to get the Castle Rock library for that. [02:25:46] S1: And, of course, that happened before the actual sales of the first syndication cycle for Seinfeld. Right. Right. Oh. Also, isn't there a wild story that Steve Bannon was an investment banker on that deal and took some of his commission in equity on the Seinfeld Waterfall? [02:26:05] S0: The details are a little bit murky on this, but I have seen it reported that Steve Bannon still gets royalties from Seinfeld syndication. [02:26:14] S1: Yeah. Because of because of this deal. Wow. Wow. So Turner and TBS buys Castle Rock, and then they turn around and sell to Time Warner in all this consolidation that's happening. The net of which is that Castle Rock and the largest ownership slug of the Seinfeld Waterfall ends up in the Warner Brothers library. Alright. So, Ben, you said now is a great time to sell. In the moment, yes, for Castle Rock. But, actually, even if they had no viable future business [02:26:56] S0: From Finson ending.
02:26:56 · Ben Gilbert, David Rosenthal
[02:26:56] S0: From Finson ending. [02:26:57] S1: From Finson ending, They should have waited because the value of the Seinfeld Waterfall, once syndication hit, was about to become way more than the $400,000,000 that they paid for it. [02:27:08] S0: I'll spoil the ending for everyone. We're pretty sure that Castle Rock, if you work through the whole waterfall, made somewhere between 2 and $2,500,000,000 on Seinfeld syndication over the years. But they captured almost none of that because they sold the entire entity. And so it was actually Turner and then Warner Brothers, the IP's ultimate resting place that would have received [02:27:38] S1: Those dollars. [02:27:39] S0: Share of those proceeds. So, I will revise my previous statement. Castle Rock absolutely should not have sold, but no one could have known that Seinfeld would go six syndication cycles and be as relevant as ever three decades later. [02:27:52] S1: Yep. But importantly, Sony keeps the distribution rights. We'll come back to that when we get to streaming in a little bit. Yep. So that was the business story of Seinfeld from 1993 to 1995, culminating in that first syndication sales cycle where Sony generates an astounding $500,000,000 in revenue that hits the, so to speak, cap table. [02:28:17] S0: Right. Sony gets there, cut off the top of that, but then there's probably 400 plus, maybe 425 ish million dollars that then flow through to everyone else who owns the Seinfeld IP just for this first cycle of syndication to the off network affiliates to watch around The US.